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Farmer Mac Reports 2009 GAAP Earnings Of $82 Million

WASHINGTON, March 16 /PRNewswire-FirstCall/ -- The Federal Agricultural Mortgage Corporation (Farmer Mac; NYSE: AGM and AGM.A) today reported that Farmer Mac’s net income available to common stockholders for fourth quarter 2009 was $5.5 million ( $0.53 per diluted common share), compared to a net loss of $61.1 million ( $6.03 per diluted common share) for fourth quarter 2008.  Fourth quarter results brought Farmer Mac’s net income for full year 2009 to $82.3 million ( $8.04 per diluted common share), compared to a net loss for 2008 of $154.1 million ( $15.40 per diluted common share).  Farmer Mac’s core earnings were $5.4 million and $16.1 million, respectively, for the three and twelve month periods ended December 31, 2009, compared to net losses of $8.8 million and $81.5 million, respectively, for the three and twelve month periods ended December 31, 2008.  Fourth quarter 2009 core earnings were driven by increased guarantee and commitment fees and net interest spread.  Fourth quarter 2009 GAAP and core earnings were reduced by provisions for losses of $2.2 million, compared to provisions of $17.2 million in fourth quarter 2008.  For the twelve months ended December 31, 2009, the net provisions for losses totaled $5.2 million, compared to provisions of $17.8 million for all of 2008.  

Farmer Mac President and Chief Executive Officer Michael Gerber stated, “We are pleased with our fourth quarter and full year results.  Our focus for 2009 was to strengthen our balance sheet, improve our risk profile, and position the company for the future.  Our fourth quarter core earnings improved to their highest level during 2009, and our capital surplus as of December 31, 2009 was $120.2 million, up from $13.5 million as of December 31, 2008.  That surplus was further increased by approximately $100.0 million after our capital raise this past January through the issuance of perpetual preferred stock by our recently-formed operating subsidiary, Farmer Mac II LLC.  With lenders in both the agricultural and rural utilities sectors continuing to experience the need for capital and liquidity and to reduce credit risk, Farmer Mac represents an important potential solution for those challenges and a means to ensure their rural customers’ borrowing needs are met.  Based on the results of 2009 and the capital raise in January, Farmer Mac is well positioned to be part of the solution for those lenders and take advantage of the opportunities ahead of us.”

Farmer Mac’s non-performing assets decreased to $62.0 million (1.41 percent of the portfolio) as of December 31, 2009, down from $84.8 million (1.94 percent) as of September 30, 2009, and $80.0 million (1.61 percent) as of December 31, 2008.  90-day delinquencies were $49.5 million (1.13 percent of the portfolio) as of December 31, 2009, down from $59.4 million (1.36 percent) as of September 30, 2009 and $67.1 million (1.35 percent) as of December 31, 2008.  Those reductions are in part a result of the progression of certain ethanol loans from “in bankruptcy” during fourth quarter 2008, to “real estate owned” as of second quarter 2009, and to “loans held for investment” as of December 31, 2009.  Though reduced, those delinquencies continue to be concentrated in the ethanol industry, with ethanol loans comprising $19.1 million of the $49.5 million of 90-day delinquencies as of December 31, 2009, compared to $49.2 million of $67.1 million as of December 31, 2008.  Other than the ethanol portfolio, the loans underlying the Corporation’s guarantees and commitments continued to perform well during 2009, with delinquencies on non-ethanol loans remaining near historically low levels consistent with the strength of the U.S. agricultural economy through the end of the year.  Farmer Mac anticipates that loan problems and reduced profitability in the protein and dairy sectors are likely to continue during much of 2010, which could lead to higher delinquencies, and a potential for provisions for losses and charge-offs.  However, Farmer Mac anticipates that those additional loan concerns should remain within the Corporation’s historical experience.  Farmer Mac will continue to closely monitor developments in industries and geographic areas experiencing stress.  As of December 31, 2009, there were no delinquencies or non-performing assets in Farmer Mac’s portfolio of rural utilities loans.    

For the year ended December 31, 2009, Farmer Mac’s effective net interest spread was 97 basis points ( $49.8 million), compared to 106 basis points ( $58.2 million) for the year ended December 31, 2008.  With the disruptions in the financial markets during late 2008, net interest spreads widened dramatically, and Farmer Mac’s short-term borrowing costs were significantly reduced, but in recent quarters, that net interest spread has returned to more historical norms.  Highlighting the return of capital market borrowing conditions to a more comparable year, during 2007 Farmer Mac’s net interest spread was 78 basis points ( $40.6 million).

Farmer Mac uses core earnings, a non-GAAP disclosure, to measure corporate economic performance and develop financial plans because, in management’s view, core earnings more accurately represent Farmer Mac’s economic performance, transaction economics and business trends before the effects on earnings of changes in the fair values of financial derivatives and trading assets.  Farmer Mac’s disclosure of this non-GAAP measure is not intended to replace GAAP information but, rather, to supplement it.

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